china's porous protectionism: the changing political economy of trade policy

China’s Porous Protectionism:

The Changing Political

Economy of Trade Policy

SCOTT KENNEDY

As China becomes more integrated into international economicinstitutions and markets, there is a growing awareness of the importance of ex-ternal factors in shaping the regulatory structure, laws, and policies governingits economy. Moreover, there is a consensus among observers that greater inte-gration into the world trading and investment systems can be equated with fur-ther economic liberalization and that any lack of openness is due to entrencheddomestic factors.1 China’s entry into the World Trade Organization (WTO) isthus seen as pivotal in furthering this transformation.2 Although such a closelink between economic openness and participation in international economicinstitutions is largely accurate, the gap between how these organizations actu-ally operate and a fully liberal economic order are increasingly important in ex-plaining some protectionist elements of China’s evolving trade regime. Con-versely, economic integration has led to growing diversification of interests withinChina and to the emergence of nonstate advocates of openness, tempering effortsat protection. The role of liberal business interests in China suggests a growingneed to understand their place in trade policy, even in authoritarian regimes.

1 For summaries of the debate over China’s foreign economic policy, see Thomas G. Moore, Chinain the World Market: Chinese Industry and the International Sources of Reform in the Post-Mao Era(Cambridge: Cambridge University Press, 2002), 34–58; David Zweig, Internationalizing China: Do-mestic Interests and Global Linkages (Ithaca, NY: Cornell University Press, 2002), 1–22.

2 Prominent contributions on China’s WTO entry that stress the WTO’s transforming role are Nich-olas R. Lardy, Integrating China into the Global Economy (Washington DC: Brookings InstitutionPress, 2002); Deborah Z. Cass, Brett G. Williams, and George Barker, eds., China and the World Trad-ing System: Entering the New Millennium (Cambridge: Cambridge University Press, 2003); and SupachaiPanitchpakdi and Mark L. Clifford, China and the WTO: Changing China, Changing World Trade (NewYork: John Wiley & Sons, 2002).

SCOTT KENNEDY is an assistant professor of East Asian languages and cultures and an adjunctassistant professor of political science at Indiana University. He has published The Business of Lobby-ing in China and several articles on various aspects of China’s evolving political economy.

Political Science Quarterly Volume 120 Number 3 2005 407

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TABLE 1

China’s Antidumping Targets (as of 31 March 2005)

Region Number of Cases

South Korea 25Japan 21United States 18EU (or member) 18Russia 8Taiwan 7Others (10 countries) 15

Source : Appendix.

The new dynamics of China’s trade policy can be best appreciated by con-sidering its recent experience with the rules of the WTO that permit membercountries to enact tariffs or other barriers to counter unfair practices of theirtrading partners. Between March 1997, when China adopted its first antidump-ing (AD) statute, and March 2005, Beijing launched investigations into casesof 35 products involving 112 countries in which foreign companies were accusedof injuring Chinese industry by exporting their products to China at prices be-low normal value (see Table 1 and Appendix). Since 2003, China has been thethird most frequent initiator of AD charges, trailing only India and the UnitedStates. In May 2002, China also invoked safeguard measures to counter whatit claimed were dramatic and unexpected surges in steel imports.

However, such tools have encountered numerous obstacles in China. Theforeign respondents have won a partial or complete victory in over 45 percentof all concluded AD cases. Moreover, the average duties levied against thosefound guilty of dumping have been low compared with such penalties levied incases carried out by other WTO members, including the United States and theEuropean Union (EU).

Although foreign respondents do not win a majority of the cases, their vic-tories are nevertheless impressive and surprising. Why have the domestic Chi-nese applicants seeking protection from their own government not won moreconsistently? Antidumping cases are administrative proceedings adjudicated inthe applicants’ countries, not the respondents’. To borrow a sports analogy, thedomestic applicants not only have home court advantage, the referees are ontheir team. Despite such a favorable setting, applicants occasionally steal defeatfrom the jaws of victory. How is that possible?

The most common explanations for China’s openness focus on officialdom.Numerous scholars stress that China’s increasing openness has been due to thestewardship of reformist leaders, who have managed to keep the upper handover other leaders less committed to openness and over local interests who op-pose such moves.3 Another version of the elite-centered perspective could stress

3 Harold K. Jacobson and Michel Oksenberg, China’s Participation in the IMF, the World Bank,and GATT: Toward a Global Economic Order (Ann Arbor: University of Michigan Press, 1990); SusanL. Shirk, How China Opened Its Door: The Political Success of the PRC’s Foreign Trade and Investment

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that even if China’s leaders prefer that Chinese applicants win every case, inorder to avoid costly reprisals or trade wars that would harm China’s nationalinterests, they occasionally order rulings on behalf of foreign defendants. A sec-ond set of explanations would shift attention to how the growing rule of lawhas made the bureaucracy and courts behave more as neutral arbiters ratherthan as biased advocates. As such, China’s government is seen as increasinglycomposed of a corps of well-trained, politically protected professionals thatdecide cases on their merits.4 Where dumping exists, duties are appropriatelyinstituted; where the respondents have demonstrated that the charges are base-less, no penalties are exacted from the foreign exporters. A final prominent rea-son given for China’s greater openness–which could translate into rulings onbehalf of foreign respondents—is that through extensive participation in theGeneral Agreement on Tariffs and Trade (GATT) and WTO, China’s leaders andtrade officials have undergone fundamental “learning” and internalized thefree-trade norms of the global trading system.5 The “learning” explanation doesdiffer from the above rationales by showing that officials’ values can be shapedby external forces; however, even those observers who stress the internationaltransmission of beliefs focus on political elites and bureaucrats as the most im-portant recipients of these ideas and concur that China’s national policy-mak-ing process is dominated by officialdom.6

As helpful as these explanations are at highlighting some general trends inChina’s trade policy, they are less useful when analyzing discrete trade disputes.China’s elites may establish general policy parameters, but they rarely becomedirectly involved in individual cases. And although the national bureaucracy isbeing streamlined and outfitted with better procedures, there is still evidence

Reforms (Washington DC: Brookings Institution, 1994); Joseph Fewsmith, China Since Tiananmen:The Politics of Transition (Cambridge: Cambridge University Press, 2001), 204–217.

4 Randall Peerenboom, “Seek Truth From Fact: An Empirical Study of Enforcement of ArbitralAwards in the PRC,” American Journal of Comparative Law 49 (Spring 2001): 249–327; Dali L.Yang,Remaking the Chinese Leviathan: Market Transition and the Politics of Governance in China (Stanford,CA: Stanford University Press, 2004).

5 Margaret M. Pearson, “China’s Integration into the International Trade and Investment Regime”in Elizabeth Economy and Michel Oksenberg, eds., China Joins the World: Progress and Prospects(New York: Council on Foreign Relations Press, 1999), 161–205; Margaret M. Pearson, “The Case ofChina’s Accession to GATT/WTO” in David M. Lampton, ed., The Making of Chinese Foreign andSecurity Policy in the Era of Reform (Stanford, CA: Stanford University Press, 2001), 337–370.

6 Kenneth Lieberthal and Michel Oksenberg, Policymaking in China: Leaders, Structures, and Pro-cesses (Princeton, NJ: Princeton University Press, 1988); Kenneth Lieberthal and David M. Lampton,eds., Bureaucracy, Politics and Decision-Making in Post-Mao China (Berkeley: University of Califor-nia Press, 1992); and Susan Shirk, The Political Logic of Economic Reform in China (Berkeley: Univer-sity of California Press, 1993). More recently, the policy community has been extended to include thelegislature and some specialists, but policy is still portrayed as government-driven and determined.Murray Scot Tanner, The Politics of Lawmaking in China: Institutions, Processes, and Democratic Pros-pects (Oxford: Clarendon Press, 1999); Fewsmith, China Since Tiananmen; and Barry Naughton, “Chi-na’s Economic Think Tanks: Their Changing Role in the 1990s,” China Quarterly 171 (September2002): 625–635.


that the decisions of officials and judges are affected by their location in thebureaucracy and their desire for self-aggrandizement, and not an impartialreading of facts. And finally, although most aspects of the global trade systempromote liberalism, as will be detailed below, the antidumping regime does not;the more Chinese officials absorb its norms, the more likely they are to favordomestic over foreign industry.

The puzzling victories by foreign respondents are better explained byChina’s integration into the global economy. Interviews in China and theUnited States with the various parties to antidumping cases reveal that unevenparticipation in international supply chains has divided elements of the govern-ment and industry into competing camps, with some favoring protection andothers preferring lower barriers.7 The relative power of both sides in specificcases, filtered through the prisms of China’s AD rules, explains why in somecases penalties are instituted, and why in others the foreign respondents (andtheir domestic Chinese allies) come away unscathed. This explanation is similarin character to the findings that international market structures and complaintsby domestic nonstate interests have created external and bottom-up pressure,respectively, that has resulted in more liberal Chinese policies.8 However, theargument presented here goes further by stressing the direct involvement ofindustry, Chinese and foreign, in the national economic policy process, a prac-tice that increasingly occurs across many issue areas.9

The story of China’s antidumping regime strengthens the position found inthe broader international political economy literature that industry interestscan be crucial in defending liberal trade policies. Some scholars have held thatbecause interests in favor of protection are better organized and more influen-tial than those favoring openness, liberalization must be explained by the inter-vention of political elites and well-crafted political institutions that limit the in-fluence of protectionists and/or the spread of liberal ideology.10 Others, though,have deftly shown that those in favor of openness can be equally proactive indefending their interests.11

7 This article’s data are primarily from over fifty interviews conducted mainly in Beijing and Shang-hai in 2002 and 2003, with Chinese and other countries’ government officials, business executives, asso-ciation leaders, and lawyers directly involved in antidumping cases. Because of the sensitivity of theinformation obtained, interview sources must remain anonymous.

8 Moore, China in the World Market; Zweig, Internationalizing China.9 On the growing direct influence of industry, domestic and foreign, on a wide variety of China’s

national economic policies, see Scott Kennedy, The Business of Lobbying in China (Cambridge, MA:Harvard University Press, 2005).

10 Stephan Haggard and Robert R. Kaufman, eds., The Politics of Economic Adjustment (Princeton,NJ: Princeton University Press, 1992); Judith Goldstein, Ideas, Interests, and American Trade Policy(Ithaca, NY: Cornell University Press, 1993); I. M. Destler, American Trade Politics, 3rd ed. (Washing-ton DC: Institute for International Economics; New York: Twentieth Century Fund, 1995); Glen Big-laiser, Guardians of the Nation? Economists, Generals, and Economic Reform in Latin America (NotreDame, IN: University of Notre Dame Press, 2002).

11 Helen V. Milner, Resisting Protectionism: Global Industries and the Politics of International Trade(Princeton, NJ: Princeton University Press, 1988); Ronald Rogowski, Commerce and Coalitions: HowTrade Affects Domestic Political Alignments (Princeton, NJ: Princeton University Press, 1989); Jeffrey


This article builds on the latter perspective in several ways. First, it high-lights the extent to which firms’ location in global production networks shapestheir policy preferences and leads elements of both domestic and foreign indus-try, occasionally in concert, to lobby for liberal outcomes. Second, althoughprevious research on the U.S. and EU antidumping regimes only found politicalinfluence by protectionist interests, this may be because those studies did notincorporate the potential role of foreign industry and its downstream domesticpartners into their models.12 Hence, this paper draws attention to an under-appreciated dynamic of the antidumping regime itself. Lobbying may partly ex-plain why those seeking protection win, but it also may explain why they lose.And third, because China is an authoritarian state with a large state-owned sec-tor and where organized policy advocacy is not expressly encouraged, its recentexperience demonstrates the need to understand the role that business has intrade policy formation in a wide variety of political settings.

To appreciate the role of competing nonstate interests in trade disputes, thearticle begins by explaining the process by which China entered the antidump-ing game in the first place. This involves articulating the motivations that theChinese had to adopt an AD regime, the steps they took to learn and institutethe regime, and the rules and procedures that define the competition. This is aprerequisite to the central focus of the paper, explaining the varying outcomesof cases by pinpointing the relevant economic and political factors at work. Theargument is clarified by comparing several cases that had different outcomes.The discussion concludes by considering the implications of this new apprecia-tion of the forces shaping trade policy.

China’s Move from Protectionism to Fair Trade

Although China’s entry into and full compliance with the WTO is consistentlyportrayed by the Western media and politicians as an abandonment of protec-tionism, the WTO routinely permits members to protect domestic industry ina limited number of circumstances and by certain methods. The underlyingnorm, what John Ruggie has aptly termed “embedded liberalism,” encouragesstates to liberalize their economies, but it also permits them to adopt counter-measures to soften the blow to domestic labor and business interests. Antidump-ing is among a group of internationally approved safety valves used to defendagainst purportedly unfair trade practices, such as dumping and subsidies.13

A. Frieden, “Invested Interests: The Politics of National Economic Policies in a World of Global Fi-nance,” International Organization 45 (Autumn 1991): 425–451.

12 Studies relying on large-N quantitative analysis include Wendy L. Hansen and Thomas J. Prusa,“The Economics and Politics of Trade Policy: An Empirical Analysis of ITC Decision Making,” Reviewof International Economics 5 (May 1997): 230–245; P. K. M. Tharakan and J. Waelbroeck, “Antidump-ing and Counterveiling Duty Decisions in the E.C. and in the U.S.: An Experiment in ComparativePolitical Economy,” European Economic Review 38 (January 1994): 171–193.

13 John Gerard Ruggie, “Embedded Liberalism Revisited: Institutions and Progress in InternationalEconomic Relations” in Emanuel Adler and Beverly Crawford, eds., Progress in Postwar InternationalRelations (New York: Columbia University Press, 1991), 201–234.


The primary force motivating China to adopt an AD regime is the sameone that pushed other developed and developing countries alike along the samepath: the reduction of tariffs and other traditional nontariff barriers.14 Theworld’s first AD law was adopted by Canada in 1904, but until the late 1960s,the AD tool was rarely used. Only after advanced capitalist countries had sharplyreduced their own trade barriers and had begun to feel competitive pressuresfrom each other and from Japan did they begin to regularly employ this long-dormant weapon. In the 1970s, as developing countries liberalized their econo-mies, they too began to use the same fair-trade tool. These countries tired ofsimply being the targets of what they perceived to be the over-aggressive useof the AD weapon by their industrialized counterparts. AD has gone from a toolmonopolized by a few developed countries to an equal opportunity weaponused by countries rich and poor alike.15 The most significant exception to thistrend is Japan. Although the leading object of AD investigations in the 1980s,Japan’s government has opted not to employ AD measures itself in order toavoid further criticism of its trade regime by the United States and WesternEurope and in the hope that the AD code would be reformed or eliminated.16

China’s route to AD fits the general pattern. The Mao-era policy of autarkygave way to a highly managed trading regime in the 1970s and 1980s. During the1990s, as part of the effort to promote growth and gain membership in theGATT/WTO, the old system was gradually dismantled, and it was buried forgood upon China’s entry into the WTO in late 2001.17 As China discarded itstraditional trade barriers, the question became what, if anything, could Chinado to shelter domestic producers from foreign competition upon accession. Al-though most scholars have focused on the obligations China must meet to bea WTO member, early in the application process, China began to stress thatmembership also carried with it certain rights.18

14 Traditional barriers include: tariffs, subsidies or loans to domestic industry, limited trading rightsfor foreign firms, bans or quotas on imported products, licensing systems for imports, foreign exchangecontrols, and cartels. Protective steps available under the GATT/WTO include: antidumping mea-sures; antisubsidy (countervailing) measures; safeguard measures; standards for health, safety, the en-vironment, labor, and technical standards; and antimonopoly statutes that discriminate against for-eign companies.

15 Boltuck and Litan correctly predicted that because of the U.S.’s and EU’s frequent use of anti-dumping, developing countries would eventually use these same tools against their originators. Rich-ard Boltuck and Robert E. Litan, eds., Down in the Dumps: Administration of the Unfair Trade Laws(Washington DC: Brookings Institution, 1991). Also see Brink Lindsey and Daniel J. Ikenson, Anti-dumping Exposed: The Devilish Details of Unfair Trade Law (Washington DC: Cato Institute, 2003).

16 Hidetaka Yoshimatsu, “The Political Economy of Antidumping in Japan,” Journal of the AsiaPacific Economy 6 (February 2001): 22–46. Interview sources also suggest that Japan has had adequatealternative nontariff barriers, making AD measures unnecessary. Interviews #D33, #D34, #D38, #D39,and #D40. While some sources believe that the Japanese prefer to avoid formal legal disputes, their activ-ism in the WTO suggests otherwise. Saadia M. Pekkanen, “International Law, Industry and the State:Explaining Japan’s Complaint Activities at the WTO,” Pacific Review 16 (September 2003): 285–306.

17 On the evolution of China’s trade regime, see Rajiv Lall, China: Foreign Trade Reform (Washing-ton DC: World Bank, 1994); and Lardy, Integrating China into the Global Economy.

18 The other rights include permanent most-favored-nation trading status, national treatment, ac-cess to WTO dispute resolution, and participation in the revision of WTO rules. Language emphasizing


TABLE 2

Antidumping Investigations Initiated against China,by Importing Country (1995–2004)

Rank Country Cases Percent of Total

1 India 76 18.52 United States 57 13.93 EU 52 12.74 Argentina 40 9.75 Turkey 34 8.36 South Africa 20 4.97 Australia 18 4.48 Peru 17 4.19 Canada 17 4.1

10 Brazil 15 3.6

Source : WTO Anti-Dumping Database (www.wto.org).

A sense of urgency to defend their rights existed because of how oftenChina itself had been an object of AD investigations by other countries. From1979 to 2004, China’s trade partners investigated Chinese firms in over 650 cases.Between 1995 and 2004, Chinese companies were hit with dumping tariffs al-most 300 times.19 Although the United States and the EU were the primaryinstigators of cases in the 1980s, as Table 2 shows, India has leapt to the front.

These cases jarred the Chinese into recognizing that the world trade orderwas not a purely free one. Chinese officials and enterprise heads were particu-larly upset that China had been treated as a nonmarket economy when investi-gated. The United States, the EU, and others argued that the Chinese govern-ment set prices and provided subsidies to industry, allowing the Chinese to sellgoods abroad at lower prices than otherwise would have been possible. Undersuch circumstances, GATT/WTO rules allow investigating countries to ignorethe price of the good in the Chinese market and use a surrogate country todetermine the normal market value against which the actual export price iscompared. In short, the United States and others were seen as hypocrites whodiscriminated against China.20

rights and obligations has been used regularly by Chinese trade negotiators and senior leaders sinceat least the early 1990s. See “Li Lanqing Receives GATT Official, Calls for Membership,” BBC Moni-toring Service, 19 October 1993; Pan Guojun, Ban Wei, and Shao Jie, “Solemn Commitments,” XinhuaNews Agency, 11 November 2001, accessed from the Factiva database (www.factiva.com), 30 Novem-ber 2003.

19 WTO Anti-Dumping Database; Zhang Lu, “Learning to Use WTO Rules for Protection,” ChinaDaily, 6 July 2004; Mark O’Neill, “Dinner Guest China Has Much More on Its Plate than G7 Ambi-tions,” South China Morning Post, 22 January 2005, 12.

20 According to China’s WTO accession agreement, WTO members are permitted to treat Chinaas a non-market economy for the first fifteen years of its membership. Chinese firms and officials op-posed this status because they that believe China’s market economy is well developed and that thecost structure of production in the surrogates chosen, most often India, is higher than in China, makingit easier to find dumping by the Chinese. Said Cho Tak Wong, chairman of a glass company hit withAD duties in the United States: “Out of the Americans’ mouths come speeches about free trade, butwhat they do is something else.” Neil King, Jr. and Peter Wonacott, “Bush’s China-Trade Dilemma:


This experience also taught China that challenging dumping accusationspays off. Prior to 1994, Chinese firms never responded to investigators’ noticesand requests for information.21 From 1987 to 2002, Chinese firms escaped pen-alties in only 25 percent of cases, but beginning in the late 1990s, they achievedsome notable victories in cases that they proactively challenged.22 Winning mar-ginally reduced the sense that the trading rules were invariably rigged againstChina and demonstrated the value of learning the complicated AD system asboth a defensive necessity and an offensive tactic. A Chinese trade lawyerspoke for many when he said that because the United States uses AD to protectits producers against the Chinese, “We’re going to learn how to use the sameweapon.”23

Adequately motivated, the next step was for the Chinese to become profi-cient at using what is an extremely complicated regime that requires economic,business, and legal expertise that was in short supply in China. Beginning in thelate 1980s, a community gradually emerged, composed of international tradespecialists, lawyers, and trade officials, who became committed to the notionthat within the context of liberalization, China should use internationally au-thorized legal means, including AD, to protect domestic industry. Early propo-nents of this approach emerged at the University of International Business andEconomics among professors and graduate students in international trade law.Two of the most influential have been Professor Zhou Shijian and his student,Wang Xuehua. In 1997, Zhou became vice president of the China Chamberof Commerce of Metal and Chemical Importers and Exporters, where he hasspearheaded those industries’ responses to AD cases abroad. Wang and a col-

Get-Tough or Go-Easy Method?” Wall Street Journal, 14 November 2002. Also see Nigel Holloway,“Sweet Smell of Excess,” Far Eastern Economic Review, 5 September 1996, 61. In April 2004, Chinabegan a campaign to have other WTO members officially declare China a market economy. As ofMarch 2005, thirty-two countries, primarily from Asia, Africa, and Latin America had granted China’srequest. However, collectively they consumed less than 15 percent of China’s exports in 2003, andonly thirteen had ever launched an antidumping case against China. For an example, see “ArmeniaRecognizes China’s Full Market Economy Status,” Xinhua News Agency, 27 September 2004.

21 Chang Tianle, “Chinese Companies Fight for Rights,” China Daily, 21 February 2003.22 WTO Anti-Dumping Database. Seventy-one percent of the metal and chemical product cases

that the Chinese contested between 1995 and 2000 went in their favor. “China is Primary Target ofInternational Anti-Dumping Campaign, Vice Minister Says,” ChinaOnline (www.chinaonline.com),22 February 2001, accessed 1 February 2003.

23 Craig S. Smith, “Joining the Club: Like Others, China Will Try to Protect Its Own Industries,”New York Times, 23 May 2000. Said a Chinese government researcher, “We should admit antidumpingis a demand for fair trade in the international market. Antidumping is based on the WTO AntidumpingAgreement. These rules are not aimed at China; they are for use in regard to all members’ importedproducts. For Chinese products to enter overseas markets, we must use WTO-related rules, obey andabide by these rules, play cards according to the rules, and only in this way can [we] effectively protectenterprises’ own rights and interests.” Wang Zhongming, WTO guize shiwu peixun duben [PracticalTraining Reader on WTO Rules] (Beijing: CPC Party School Press, 2002), 168. Also see Wang Yiwei,“Fanqingxiao shang xu jiandun limao” [Antidumping Still Needs Firm Shield and Sharp Spear],Zhongguo gongshang shibao [China Business Times], 7 March 2002.


league opened their own private law firm in 1993. The two later parted ways,and since then, Wang has become the country’s most prominent advocate forinitiating AD cases against foreign firms exporting to China. As part of his ef-fort to raise legal awareness and, not coincidentally, attract business, Wang haslectured on AD before numerous national and local government agencies, uni-versities, research institutes, and companies.24

Critical to the domestic community’s growth has been its interaction withand integration into the AD regime’s global legal and bureaucratic leadership.25

Several international law firms with offices in China have active AD practices,most often representing the foreign companies accused of dumping in China.Because these foreign law firms have not been allowed to participate in hear-ings (or in court), they work in conjunction with local firms. Foreign firms havealso hired and trained Chinese lawyers, many of whom are especially usefulbecause of their contacts with government officials. In addition, since the mid-1990s, like Wang Xuehua, foreign lawyers have held seminars and given lec-tures to officials, lawyers, and companies across the country.26 On top of theseefforts, the WTO Secretariat has been quite active in teaching developing coun-tries about the global AD regime. Its Rules Division has led dozens of trainingseminars around the world, including in Beijing and Geneva, and it has pro-vided AD law templates to member countries.27 It is through such cooperationthat Chinese lawyers have been exposed to international “best practices.” Oncetrained themselves, trade officials have gone on to host training programs forofficials in other ministries, local governments, industry associations, and enter-prises.28 Such direct communication has been supplemented by a rich assort-ment of books and articles.29 The result of these efforts has been the emergenceof a group of specialists and a growing awareness among local industry of bothChina’s responsibilities and rights as a WTO member.

24 Interview #D3; Wang Yong, “Dumping Allegation Trashed,” China Daily Business Weekly,5 November 2000; Wang Yiwei, “Zhongguo qidong fanqingxiao 5 zhounian—yige haode kaishi—fangbeijing huanzhong lushi shiwusuo wang xuehua” [5th Anniversary of Launching Antidumping—AGood Start—Interview with Huanzhong Law Firm’s Wang Xuehua], Zhongguo gongshang shibao[China Business Times], 25 March 2002.

25 It should be stressed that the norms and behavior of Chinese trade lawyers differ substantiallyfrom those of lawyers in other areas. Ethan Michelson, “Unhooking From the State: Chinese Lawyersin Transition” (Ph.D. dissertation, University of Chicago Department of Sociology, 2003).

26 Interviews #D7 and #D12.27 Interview #D18.28 Interviews #D10 and #D27.29 Chen Jing, Anyi WTO fanqingxiao xieyi [Annotations by Cases to WTO Antidumping Agree-

ment] (Beijing: University of International Business and Economics Press, 2002); Han Qiaowen, WTO100 wen: hangye xiehui zai zhongguo ru shi hou de sikao [100 Questions on WTO: Thoughts for Indus-try Associations after Joining WTO] (Shanghai: Shanghai People’s Press, 2002); He Maochun, Zhong-guo duiwai jingji maoyi baipishu 2002 [China Foreign Trade and Economy White Paper 2002] (Beijing:China Materials Press, 2002), 470–527; and Liu Wanfang et al., Zhimian fanqingxiao [Facing Anti-dumping] (Guangdong: Guangdong Economics Press, 2001).


China’s Antidumping Code: Adopting “Best Practices”

Motivated by the need to compensate for reduced barriers and led by a commu-nity of officials, lawyers, and industry representatives, China has adopted rulesand procedures that are largely consistent with the requirements of the WTO.What makes China’s AD regime appear protectionist is not how much it di-verges from, but rather how closely it approaches international “best prac-tices.” This can be seen by examining the principles and specific rules that de-fine dumping and provide the guidelines for determining whether dumping hasoccurred, and the institutions and procedures by which cases are handled.

Consistent with global practice, China does not define dumping as sellingbelow cost in an effort to eliminate competitors. Although such behavior,known as predatory pricing, embodied the original conception that dumpingwas part of an effort to gain a monopoly, it is extremely difficult to prove.30

Thus, in the 1910s, dumping was redefined as price discrimination, in which ex-porters sell a product abroad at a price below what it sells for in the home mar-ket, what is known as “normal value.” Dumping is deemed unfair because thisbehavior, it is argued, can only occur when the exporters operate in a shelteredhome market in which the government institutes high trade barriers, providessubsidies, or permits cartels. Firms can then sell their products abroad morecheaply than would be the case in a competitive market, and thus, the perpetra-tors take away customers (and profits) from competitors in the destination mar-ket.31 If competitors in the importing country can demonstrate that they havebeen injured by dumping, then their government is within its rights to institutea tariff against the exporting firms equal to the “dumping margin,” that is, thegap between the product’s actual export price and its proper normal value. Thus,the underlying principle of AD law shifted from opposing monopolies to oppos-ing unfair trade practices, and the standard of proof shifted from demonstratingintent (predation) to showing the consequences (injuring domestic producers).

China has inherited not only the global regime’s basic principles but also itsmore detailed rules and procedures. China’s first AD statute, adopted in 1997,was partially consistent with GATT/WTO guidelines but was quite vague in

30 Greg Mastel, Antidumping Laws and the US Economy (Armonk, NY: ME Sharpe, 1998); RajKrishna, “Antidumping in Law and Practice,” World Bank Working Paper Series, No. 1823 (September1997); J. Michael Finger, “The Origins and Evolution of Antidumping Regulation” in J. Michael Fin-ger, ed., Antidumping, How It Works and Who Gets Hurt (Ann Arbor: University of MichiganPress, 1993).

31 Critics of antidumping identify many legitimate reasons to sell goods below typical prices, includ-ing clearing out inventory when goods are in over-supply and gaining a foothold in a new market.These practices are common—and legal—when done within a country. Gary N. Horlick and StevenA. Sugarman, “Antidumping Policy as a System of Law” in Miguel Rodriguez Mendoza, Patrick Low,and Barbara Kotschwar, eds., Trade Rules in the Making: Challenges in Regional and Multilateral Nego-tiations (Washington DC: Organization of American States and the Brookings Institution, 1999),341–364.


many areas.32 The regulation was substantially revised in November 2001, justprior to China’s WTO entry; multiple implementing rules were issued in 2002,and a modestly revised version of the statute was issued in 2004. The revisedAD statutes closely follow the WTO Antidumping Agreement, even verbatim,in some instances.33

Thus, China’s regime has incorporated changes in the global rules adoptedover the past thirty years that have eased, not tightened, the standards neces-sary to prove that foreigners have dumped goods and that such actions signifi-cantly injured domestic producers. Proving dumping originally involved mak-ing a direct comparison of a good’s export price and its home market pricebased on detailed information provided by the accused exporters. With thestatutory changes, when the home market price is too difficult to determine orunreliable, investigators can estimate it in a variety of ways, such as estimatingthe cost of production (plus a profit margin) or using actual or estimated pricesof the good from a third country. The standard in China for proving injury, likethe global AD regime, involves merely showing that the dumping is just onecause of the domestic industry’s plight. In practice, investigators the world overhave only had to find the coexistence of dumping and poorly performing do-mestic companies to prove causation between the two.34 Moreover, under pres-sure from import-competing industries, the United States and others made surethat GATT and WTO rules do not require that the damage to other domesticinterests (such as downstream users or consumers) caused by raised tariffs beconsidered by investigators when determining whether to find in favor of theaccusers. Such a “public interest” provision, which has not been in Chinese law,has only been adopted by a few countries.35 These rules, in China and else-

32 Lester Ross and Susan Ning, “Modern Protectionism: China’s Own Antidumping Regulations,”China Business Review 27 (May–June 2000): 30–33.

33 The text of the WTO Antidumping Agreement is on the WTO’s website (www.wto.org), accessed8 June 2005. The text of the original PRC Anti-Dumping and Anti-Subsidy Regulations, promulgated25 March 1997, is online at NovexCn.com (www.novexcn.com/anti_dump_subsidy_97.html), accessed8 June 2005. For the text of the PRC Anti-Dumping Regulations, issued 26 November 2001, imple-mented 1 January 2002, and its implementing regulations, see the U.S. Department of Commerce’sTrade Remedy Compliance Staff website accessed at http://ia.ita.doc.gov/trcs/downloads/documents/china/index.html, 8 June 2005. Also see Patrick M. Norton and Kermit W. Almstedt, “China’s NewAnti-dumping Rules: Battleground for a New Protectionism?” China Law & Practice 16 (February2002): 79–83; and Patrick M. Norton and Kermit W. Almstedt, “China Joins the Trade Wars,” ChinaBusiness Review 30 (January–February 2003): 22–29, 42. The revised 2004 statute is available from theMinistry of Commerce, “China Trade Remedy Information” (www.cacs.gov.cn).

34 Thomas J. Prusa and Susan Skeath, “The Economic and Strategic Motives for Antidumping Fil-ings,” NBER Working Paper Series 8424 (August 2001): 4; Patrick A. Messerlin and Geoffrey Reed,“Antidumping Policies in the United States and the European Union,” The Economic Journal 105(November 1995): 1569.

35 The EU and Canada have explicit public interest provisions. Australia has issued subsidiary legalinterpretations of their laws authorizing investigators to consider the effect of dumping on the overallnational Australian interest. Donald Feaver and Kenneth Wilson, “An Evaluation of Australia’s Anti-Dumping and Countervailing Law and Policy,” Journal of World Trade 29 (October 1995): 207–237.


where, tilt the scales strongly in favor of the accusers, leaving many to believethat the antidumping system that purports to stop unfair trade is itself inescap-ably biased.36

China’s Antidumping Procedures:New Roles for State and Society

Because of the potential benefits to domestic industry, it is not surprising thatChina has adopted the principles and rules of the global AD regime. Less ex-pected, though, is the extent to which the government has been willing to mod-ify the process by which trade disputes and policy are handled. These changesare inconsistent with perspectives that stress either a dominant role for elitesor an autonomous bureaucracy that strictly follows the law. Nonstate actors arecentral to the entire process.

In the past, foreign economic policy was strictly a government concern.Trade and investment authorities, in consultation with other ministries and thesenior political elite, determined which sectors and products to protect and bywhat means. Those decisions were not open to systematic influence from Chi-nese enterprises, not to mention foreign industry. In the case of fair trade dis-putes, by contrast, the government acts in response to complaints lodged bydomestic industry. The Chinese government’s role has switched from that ofadvocate to that of arbiter; even if it prefers to play advocate, it must at leastmaintain the pretense of being evenhanded. The division of labor within thegovernment in China also mirrors that of other WTO members. Once the au-thorities accept a case, they launch investigations into whether there has beendumping and whether the dumping caused the injury claimed by the applicants.China copied the American system in having these two elements of the caseinvestigated by separate agencies. The Ministry of Foreign Trade and Eco-nomic Cooperation (MOFTEC) Fair Trade Bureau for Imports and Exportshas investigated dumping, whereas the State Economic and Trade Commission(SETC) Industry Injury Investigation Bureau has examined the injury claim.Although these bureaus were placed under the new Ministry of Commerce inMarch of 2003, their respective responsibilities have remained the same.

As the role of government has shifted, that of the “interested parties”—theaccusing domestic applicants and the accused foreign respondents—has grown.Domestic companies threatened by imports are assisted in their claims by legalcounsel. Although industry often seeks legal aid after feeling the effects ofdumping, lawyers also alert industry to such behavior. Following the exampleof some foreign firms, Wang Xuehua’s Huanzhong Law Firm operates as theinternational trade law equivalent of an “ambulance chaser,” tracking indus-tries and initiating contact with potential clients. Wang’s firm has represented

36 Lindsey and Ikenson, Antidumping Exposed.


the domestic applicants in a majority of the AD cases in China.37 Chinese tradeassociations have become involved as well. They have helped their membersinitiate cases, have initiated cases themselves, and have participated in investi-gations.38 And like associations elsewhere, several have established monitoringsystems to track the prices and market shares of domestic and foreign firms.39

On the other side, the foreign firms accused of dumping and their representa-tives also are institutionally included in the process. And although their directinterests are not required to be considered, the downstream users of the im-ported goods, who in principle are allies of the foreign companies, are ofteninvolved in the cases as well. The last notable aspect regarding the participantsis how China has modified its definition of “domestic” and “foreign” industryto be consistent with WTO requirements. Because the law is aimed at pro-tecting firms that produce within China’s borders, foreign-invested companies,even wholly foreign-owned enterprises, can apply for relief, a request that hasbeen granted in several cases.

The process by which cases are adjudicated also differs from the past. TheFair Trade Bureau uses questionnaires, onsite investigations, and formal hear-ings with the interested parties to determine whether dumping has occurred.The Industry Injury Investigation Bureau relies on interested parties’ writtensubmissions, hearings, and informal meetings to determine whether the dump-ing has injured domestic industry. If both bureaus find on behalf of the appli-cants, preliminary dumping tariffs are announced. Further information is col-lected, allowing applicants and respondents to elaborate their positions beforea final determination is issued. The reasoning underlying the decision must bespelled out in both the preliminary and final rulings.40

In the earliest cases, the Fair Trade Bureau and the Industry Injury Investi-gation Bureau cut many corners in their investigations and did not provide suf-ficient explanations for their determinations. Almost without exception, observ-ers interviewed for this study agree that the various aspects of investigationsincreasingly conform to WTO rules. Such progress reflects both a process oflearning by doing and the approaching requirement to adhere to the WTO Anti-dumping Agreement. The questionnaires are clearer, and hearings, originallynot well run, have improved. In an early Fair Trade Bureau hearing on dump-

37 Boheng Law Firm, also located in Beijing, has also recently become one of the leading firms torepresent Chinese applicants seeking protection from imports.

38 On the evolution of government policy toward trade associations and their role in other economicpolicy making, see Kennedy, The Business of Lobbying in China.

39 Julia Han, “Officials Prepare for Anti-Dumping Lawsuits,” South China Morning Post, 16 April2001; Han, WTO 100 wen; Yu Hui, Hangye xiehui ji qi zai zhongguode fazhan [Industry Associationsand Their Development in China] (Beijing: Economic Management Press, 2002): 88–110; “Huagongfanqingxiao ‘re’ zhong you ‘leng’” [Cold Spell in Petrochemical Antidumping Fever], Zhongguo hua-gong bao [China Petrochemical News], 7 April 2003.

40 Final determinations are formally issued by the State Council Tariff Policy Commission. Com-posed of officials from trade and other parts of the bureaucracy, it has the authority to adjust tarifflevels but not to fully reverse a verdict. Interview #D48.


ing, much of the discussion focused on injury, even though that is an issue thatonly the Industry Injury Investigation Bureau (then under the SETC) is sup-posed to investigate. At an early SETC hearing, a company not party to thecase was allowed to attend and make remarks, despite violating standard inter-national procedures by doing so. Over time, hearings have become better struc-tured, with more opportunity for both sides to present their positions. In theinjury hearings, in particular, the official panelists pepper both applicants andrespondents with questions. The Fair Trade Bureau has become more open tousing pricing information and arguments from respondents; its dumping deter-minations have gone from stating only the findings to including detailed justifi-cations as to how the dumping margins were calculated. And finally, investiga-tors increasingly abide by time requirements concerning the period betweendomestic industry’s application and their decision of whether to accept the case,and the length of the investigation itself. Despite some continuing problems,China’s antidumping system increasingly looks and operates like those in ad-vanced industrialized countries.41

Determining Winners and Losers

Reviewing why the Chinese government adopted antidumping into its traderegime and how the system operates in China provides the necessary founda-tion for analyzing the factors that determine the outcome of specific cases. De-spite the existence of an authoritarian state with a well-deserved reputation foraiding domestic industry at the expense of foreign interests, domestic appli-cants’ success rate (the proportion of cases in which they win relief) is far from100 percent. As Table 3 shows, China has a higher success rate than do most coun-tries, but some other long-standing WTO members have even higher rates. Inaddition, the way in which the WTO calculates success rates (at the countrylevel) masks instances in which individual foreign companies are not foundguilty, even when others from their country are, or when their products havebeen exempted from AD duties, outcomes which have occurred several timesin China. If one tallies outcomes by product (more than one country is typicallyinvestigated in any given product case), in only thirteen of twenty-four con-cluded cases has the decision been entirely in the applicants’ favor (see Appen-dix). Moreover, the average penalty that China invokes against foreign dump-ers is much lower than that of most other countries (see Table 4).

41 As of 2003, foreign respondents still criticized procedures, rulings, and limits on appeals. Authori-ties have granted more latitude to domestic applicants than to respondents in making their documentsconfidential, and domestic applicants appear to have more ex parte communications with officials thando foreign respondents (although foreign respondents and their domestic customers also usually havegood connections with officials). The justifications for the dumping margins, injury, and causation areclaimed to be unpersuasive and not as detailed as decisions issued by the EU and the United States.And although judicial review regulations have been issued in accordance with WTO requirements, anappeal has yet to be heard in a Chinese court. Losing respondents could appeal to the WTO for disputeresolution but have yet to do so.


TABLE 3

Success Rate of Major Initiators of Antidumping Cases*(1995–2001)

Rank Country Success Rate

1 India 95.52 Egypt 89.33 Turkey 79.24 Venezuela 75.95 China 75.86 Mexico 73.97 South Africa 73.38 United States 66.29 Republic of Korea 65.9

10 Canada 64.711 EU 61.812 Argentina 61.513 Colombia 58.814 Peru 58.115 Brazil 55.316 Indonesia 45.217 Australia 29.518 New Zealand 29.4

Sources : Compiled from the WTO members’ reports on their dumping activity,available in the WTO Anti-Dumping Database; and the Ministry of Commerce“China Trade Remedy Information” website (www.cacs.gov.cn).

* Note : Includes only countries that initiated at least twenty cases duringthe period.

TABLE 4

Average Antidumping Tariffs of Major Initiators* (1995–1999)

Rank Country Tariff (% )

1 Argentina 84.82 Australia 59.33 Mexico 59.14 Brazil 53.25 United States 47.66 South Africa 45.27 Canada 44.78 China 31.19 Republic of Korea 28.9

10 EU 27.711 Turkey 10.6

Sources : Non-China data from Bruce Arnold, “Antidumping Action in theUnited States and Around the World: An Update,” Congressional Budget Officepaper, June 2001, p. 70. China data from the Ministry of Commerce, WTO, andmedia reports.

* Notes : Non-China data are based on cases initiated from 1995 to 1999;Chinese data are from cases initiated between 1997 and 2001. Data for Indiaand some others listed in Table 3 are not available.


Previous research on other countries’ AD regimes suggests that case out-comes are affected by three factors: the specific AD rules, the nature of thegovernment institutions that adjudicate cases, and pressure from industry inter-ests. From 1955 to 1968, the success rate of cases in the United States was only3.2 percent. Following the adoption of more lax standards for determiningdumping and injury, the success rate jumped to over 50 percent during 1980–1993.42 Because their expected missions and autonomy from outside pressuresvary, which institutions are responsible for adjudicating AD disputes also canaffect case outcomes. After responsibility for determining the dumping part ofan applicant’s claim in the United States shifted from the Treasury Departmentto the Department of Commerce (DOC) in 1979, claims found a more sympa-thetic ear, with the DOC finding dumping in 95 percent of applications. By con-trast, in Australia, the government created an independent Anti-DumpingAuthority in the late 1980s to act as a check against the more pro-domestic in-dustry slant of the Customs Service. The independent office was eliminated in1998, and since then, Australia’s success rate has almost doubled.43

Despite the technical features of AD, industry lobbying has also played amajor role in determining case outcomes. In the United States, companies witha large number of employees and with production facilities in districts with amember on the House Ways and Means Subcommittee on Trade have thegreatest chance of winning their cases, as do those who give greater campaigncontributions to those members. The trade subcommittee members can bringpressure to bear on the DOC and International Trade Commission by holdinghearings, by adjusting the agencies’ funding, and by back-room lobbying.44 Inthe European Union, industries concentrated in a certain region or dominatedby a few companies win more often than less-concentrated ones. In addition,the members of the EU’s Council of Ministers, which makes the final rulings,regularly engage in horse-trading on cases at the behest of business interestsfrom their respective countries.45 But not only do protectionist interests pres-

42 I. M. Destler, American Trade Politics, 3rd ed. (Washington DC: Institute for International Eco-nomics; New York: Twentieth Century Fund, 1995), 141, 154. During the AD regime’s first forty-sevenyears (1921–1967), the global success rate was just over 10 percent. Finger, “The Origins and Evolutionof Antidumping Regulation,” 26. The average AD tariff rate imposed on foreign respondents in U.S.cases has risen as well. Brink Lindsey, “The US Antidumping Law: Rhetoric versus Reality,” Journalof World Trade 34 (February 2000): 1–38.

43 Donald Feaver and Kenneth Wilson, “An Evaluation of Australia’s Anti-Dumping and Counter-vailing Law and Policy,” Journal of World Trade 29 (October 1995): 207–237; Richard Whitwell, TheApplication of Anti-Dumping and Countervailing Measures by Australia (Rockhampton, Australia:Central Queensland University Press, 1997); “Anti-dumping Needs Review,” Australian Financial Re-view, 19 June 2000, 68; and WTO Anti-Dumping Database.

44 Hansen and Prusa, “The Economics and Politics of Trade Policy”; Wendy L. Hansen, “The Inter-national Trade Commission and the Politics of Protectionism,” American Political Science Review 84(March 1990): 21–46; and Philip A. Mundo, National Politics in a Global Economy (Washington DC:Georgetown University Press, 1999), 231–274.

45 Tharakan and Waelbroeck, “Antidumping and Counterveiling Duty Decisions in the E.C. andin the U.S.”; Interview #D19.


sure governments, the foreign respondents and their domestic allies—importers,downstream users, and consumer groups—make their voices heard as well. Inthe United States, downstream users of steel, semiconductors, and other inputshave successfully lobbied to have trade penalties lowered or shortened.46

Similar pressures exist in China and are more important in determining theoutcomes of cases than are reformist political elites or bureaucrats acting ontheir own accord to defend their organizations’ interests or impartially imple-ment the rules. It is unclear how China’s AD statutes affect the success rate,because the rules apply across cases and are similar to those in other countries.And because the success rate has not changed appreciably since the Ministryof Commerce took over adjudication of cases, the bureaucratic structure doesnot appear to independently affect cases.

The impact of competing interest group pressures in China, on the otherhand, is quite visible. Interested parties’ ability to influence whether their casesare investigated and the case outcomes is determined by their economic cir-cumstances and their political clout.

The vast majority of cases investigated to date have involved chemical andsteel products. Both industries are highly concentrated, relative to other sectorsin China. Because the AD rules require that applicants control at least 25 per-cent of the domestic market, high concentration makes it easier for firms inthese industries to meet this threshold and coordinate the submission of a peti-tion. Equally important, these industries are relatively less integrated into in-ternational production and sales networks than are most industries; they areinvolved in relatively few joint ventures, and they primarily produce for thedomestic market.47 Thus, chemical and steel firms generally see imports asanathema to their interests. And because they are large and state owned, themost important firms in these industries have significant political influence atthe local and, sometimes, national level. Hence, when they complain, the gov-ernment is more likely to respond with help. Given the usual applicants, re-spondents face an uphill fight in defending themselves.

Despite rules that favor domestic producers and despite the economic andpolitical weight of many of the domestic firms that apply for protection, foreignrespondents have achieved partial or complete victories in more cases than onemight expect. The key to explaining this puzzle is to recognize that foreign ex-porters may be economically and politically powerful themselves and, evenmore important, they may have important allies—the Chinese industries thatbuy and use their products. When the Chinese importers and downstream usersof their goods come to their defense, foreign respondents have a strong chanceof winning their cases. This is despite the fact that China’s AD regulations havenot officially recognized the interests of these groups as a legitimate concern.In cases in which they have pressed their views before the Chinese government,respondents have never been fully defeated.

46 Destler, American Trade Politics, 195–196; Mundo, National Politics in a Global Economy, 266.47 Using Milner’s typology, such characteristics are indicative of Type-1 firms, which are typically

most in favor of protection. Milner, Resisting Protectionism, 24–26.


Three conditions determine whether the natural economic allies of the for-eign respondents become involved in a case. The first is how important the im-ported product is to its domestic users. When good domestic substitutes for animported product are not available and quality is critical (for example, whenusing the imported good in the production of another good that is to be ex-ported), the interest of downstream users in the AD case rises. Second, if down-stream users are large and, thus, important economically and politically, theyare more able to influence the outcome of a case. And third, a downstream userthat has a bureaucratic representative who can insert his opinion into a case ismore likely to have its interests taken into consideration.

Blowing Home Court Advantage

The integration of Chinese industries into global supply networks has dividedthe Chinese into competing camps, alternately aligned against and allied withforeign business. The relative strength of each side and their relative access tothe deliberation process directly affect the outcome of antidumping disputes.To demonstrate how these dynamics operate, what follows is a description ofthree cases that had different outcomes due to the varying involvement of theChinese allies of the foreign respondents.

Newsprint

In China’s first antidumping case, launched in November 1997, domestic news-print producers accused Canadian, South Korean, and American firms of sell-ing newsprint in China at far below normal value, leading to a surge in importsthat left domestic producers in terrible financial difficulty. Although little evi-dence was presented to demonstrate that the applicants were injured by dump-ing, they still won a complete victory in the case.48 And although they may havebeen justified in their claims, equally important, the foreign respondents wereunable to persuade the importers of their products to speak up. They were un-likely to do so because newsprint of similar quality could be provided easily byproducers in China. Moreover, even if their costs rose, that did not matter much,because the state-owned newspapers that used newsprint had very soft budgetconstraints. Hence, switching suppliers mattered little, regardless of the cost.In addition, although some of the end-users, such as the People’s Daily, werebig and politically relevant, they were organizations that typically followed or-ders. And, finally, these producers had no obvious bureaucratic ally who wouldcome to their defense. These factors all conclusively worked in the domesticapplicants’ favor and against the interests of the foreign respondents.49

48 Gao Wei, “Anti-Dumping Ruling on Newsprint Imports,” China Daily, 4 June 1999; Kermit Alm-stedt and Patrick M. Norton, “China’s Antidumping Laws and the WTO Antidumping Agreement(Including Comments on China’s Early Enforcement of its Antidumping Laws),” Journal of WorldTrade 34 (December 2000): 75–113.

49 Interviews #D9 and #D15.


Stainless Steel

By contrast, Japanese and South Korean stainless steel producers achieved apartial victory in a case initiated in June of 1999. That seemed unlikely at theoutset, because the applicants were three important steel producers (TaiyuanSteel, Shaanxi Precision Steel, and Pudong Specialty Steel), and Pudong Steelhad just been merged into Baoshan Iron & Steel (Baogang), China’s most ad-vanced and politically influential steel manufacturer. Despite being the world’slargest producer of steel, in the 1990s China became a large importer of high-quality stainless steel that its firms could not produce themselves. It was, thus,in the domestic applicants’ interest to lock foreign firms out of the market whilethey developed a greater independent capability in this area. Behind the scenes,the applicants and Baogang lobbied hard for an affirmative ruling, which theywon. Several Japanese respondents paid AD duties, while one Japanese andsix South Korean firms agreed to a price undertaking in which they raised theprices of their goods an amount equal to the dumping margin.

Despite the apparent ruling in favor of the applicants, the respondents wona partial victory. Many of their goods were granted exemptions from the penal-ties, and the goods they sold to duty-free zones in China were exempted from hav-ing to pay any tariff, standard or AD. The compromise was reached because therespondents persuaded their Chinese customers to submit briefs to MOFTECand the SETC in their defense. They argued that the domestic stainless steel pro-ducers did not produce precisely the same goods as the foreigners (the widthand quality of the steel sheets were different) and that the imported goods werecritical to the final products, which were to be exported. In addition to the vitalrole of these products to their businesses, the end-users who complained werefamous large home appliance and auto manufacturers who could gain the earof senior trade officials and who could also mobilize local and national officialsto carry their banner. Multiple industry and government interview sources re-port that MOFTEC and the SETC, feeling pressure from both sides, decidedto split the difference.50 Since the ruling, stainless steel imports have risen sig-nificantly.51

Lysine

Three producers of the chemical lysine, an amino acid often added to animalfeed, brought a case against American, South Korean, and Indonesian produc-ers in June of 2001. One of the three applicants was a typical state-owned enter-prise seeking import protection; the other two were joint ventures hoping tolock out of the Chinese market their foreign rivals who had not invested in the

50 Patrick M. Norton and Kermit W. Almstedt, “Defending Dumping Claims: Exporters to ChinaBeware,” China Law & Practice 14 (June 2000): 32–39; Interviews #D7, #D12, #D21, #D48, and #D51.

51 “China’s 2002 Imports Top Those into the USA,” Steel Business Briefing, 21 February 2003.


People’s Republic of China.52 After an eighteen-month investigation, the gov-ernment determined that the three respondents had dumped their products inChina but that the sales did not injure domestic lysine producers. So, the casewas dismissed.

The foreign respondents benefitted from three circumstances. First, thetrade association to which the domestic applicants seeking relief belonged, theChina Feed Association, had both members that produced lysine and othersthat used lysine in their products—most importantly, animal feed. At a hearingheld in January of 2002, the China Feed Association presented evidence onbehalf of its downstream members. One such member is the Hope Group, oneof China’s largest private feed producers, whose president is also a member ofthe National People’s Congress. An interview source suggests that the HopeGroup persuaded the Feed Association to take its side, deflating the argumentsof the applicants.

Second, the Ministry of Agriculture weighed in on the side of the respon-dents as well, arguing that a victory for the applicants would result in a rise inthe price of animal feed, the brunt of which would be borne by China’s farmers.In addition to having a vested interest in the stake of farmers, the Ministry ofAgriculture was allowed to contribute its opinion because Article 7 of China’sAD regulations states that in any case involving agricultural products, the Min-istry of Agriculture must be consulted. Hence, although some of the down-stream users of the respondents’ products (feed producers) were large and in-fluential, the respondents also benefitted from a situation in which farmers,fragmented and unlikely to be aware of the case, had a bureaucratic patron thatthe law specified should defend their interests.53

Third, the clout of the foreign respondents, while it probably did not affectthe case’s ultimate ruling, did impact the timing of the verdict. The three foreigncompanies were some of the largest chemical producers in the world—Ger-many’s BASF, Samsung from South Korea, and the American firm ArcherDaniels Midland.54 They dwarfed the Chinese applicant as well as the foreign-invested companies that were trying to keep them out of the market. Most im-portantly, BASF is one of the largest foreign investors in China. The decisionin June of 2002 to delay making a final verdict was made just as BASF was setto announce a new multi-billion-dollar joint venture in Jiangsu province. Andthe final judgement in favor of the foreign producers was issued in late Septem-ber of 2002, just prior to the 30th anniversary of the establishment of German–Chinese diplomatic relations. Although several sources, including governmentofficials who were involved in the decision, agree that the lobbying of the Minis-

52 Foreign chemical producers with production facilities in Australia have used a similar strategy.Whitwell, The Application of Anti-Dumping, 326–354.

53 “Lysine Antidumping Case,” accessed at Huanzhong Law Firm website (www.huanzhonglaw.com), 1 February 2003; and Interviews #D11, #D17, and #D27.

54 The accused respondents were a BASF subsidiary in South Korea, a Samsung subsidiary in Indo-nesia, and Archer-Daniel-Midland’s production facility in the United States.


try of Agriculture on behalf of farmers was the determining factor that resultedin the case being dismissed, BASF’s importance to the Chinese economy cer-tainly did not hurt its case and provided the opportunity for a quiet diplo-matic gesture.55

Although the effect of downstream users was felt in earlier cases, accordingto government and industry sources, the lysine case was a watershed. Despitethe lack of an explicit public-interest provision in China’s AD statute, tradeofficials at that point informally decided that they would follow the EuropeanUnion’s example of carefully weighing the interests of downstream users andconsumers before making a decision in all future cases. This practice has an-gered applicants and their lawyers, both because it violated Chinese law andbecause it is detrimental to their desire for protection. In defiance of such com-plaints, considering all sides’ preferences has become standard procedure. Infact, to the chagrin of those seeking protection, China’s revised AD statute,issued in early 2004, includes a new public interest provision (Article 37), mak-ing what was once implicit now explicit.

Conclusions

One of the most ubiquitous phrases spoken by Chinese from all walks of lifeover the past decade is the admonition for China to “yu guoji jiegui,” or “geton the international track.” Its invocation is a call for China to adopt globalbest practices in corporate business behavior, economic regulation, foreign pol-icy, the political process, and even personal relationships. And in almost everyinstance, the implication is that following foreign practice will make Chinesesociety more efficient, liberal, open, prosperous, and safe. Although this is oftenthe case, many foreign “best practices” do not live up to that image. The globalAD code is one such area. Full integration into the global trade system is notequivalent to complete liberalization. Seen in this light, the well-worn popularphrase deserves to be reinterpreted.

The normative bias of individual Chinese is mirrored in the literature aboutlearning in foreign policy.56 With regard to China, in addition to economic liber-alization, research has focused on the transfer of Western corporate gover-nance practices, environmentalism, human rights norms, and liberal arms con-trol regimes.57 But just as the Chinese have learned about embedded liberalism

55 Interviews #D43, #D44, #D45, #D48, and #D50. BASF, through its German headquarters or over-seas subsidiaries, has been a respondent in at least seven other dumping cases in China. They haveeither been cleared of the charges or penalized with relatively low tariffs.

56 Jack S. Levy, “Learning and Foreign Policy: Sweeping a Conceptual Minefield,” InternationalOrganization 48 (Spring 1994): 279–312.

57 Economy and Oksenberg, China Joins the World; Elizabeth Economy, “The Impact of Interna-tional Regimes on Chinese Foreign Policy-Making: Broadening Perspectives and Policies . . . But Onlyto a Point” in Lampton, ed., The Making of Chinese Foreign and Security Policy, 230–253; AlastairIain Johnston, “Learning Versus Adaptation: Explaining Change in Chinese Arms Control Policy inthe 1980s and 1990s,” China Journal 35 (January 1996): 27–61; and Doug Guthrie, Dragon in a Three-Piece Suit: The Emergence of Capitalism in China (Princeton, NJ: Princeton University Press, 1999).


and a new style of protectionism rooted in the principle of fairness and dressedin the garb of the rule of law and complicated technical calculations, so too havethey been exposed to, internalized, and drawn upon foreign behaviors that con-tradict “reformist” tendencies in other areas. The Chinese have learned aboutcartels as a tool to prop up prices, about a sustainable development paradigmthat stresses protecting the environment only in the broader context of promot-ing rapid growth, and about the legitimacy of possessing and using nuclearweapons in certain contexts.58 The learning of such behaviors may not representa complete break with their own past, but the education has provided new vo-cabulary, rationales, tools, and procedures that indicate an important evolu-tion in Chinese policies. There is every reason to believe that China’s experi-ence of learning both “good” and “bad” norms from the world’s dominantpowers is commonplace. The spread of antidumping regimes is just one exam-ple among many.59

Despite such learning, trade disputes are not always resolved to the satisfac-tion of the protectionist side. Antidumping is not an exception to the rule, butan indicator of the common involvement of business in the policy process thatresults in maintaining openness. China also has had difficulty utilizing otherWTO-authorized protective tactics for the same reasons. To give just one exam-ple, in March of 2002, the U.S. government adopted “safeguard” duties againsta supposed glut of foreign steel that it claimed was injuring U.S. producers. Atthe behest of domestic steel manufacturers, China joined other steel exportersin challenging the U.S. action before the WTO, and it invoked its own safe-guard measures (quotas and duties) against foreign steel, claiming that the U.S.tariffs had led others to suddenly sell their steel to China.60 Before long, though,Chinese steel importers and large downstream users in the automobile, oil, andconsumer appliance sectors complained loudly about shortages in critical typesof steel and rising costs. In a dramatic September 2002 public hearing, lawyersfor the Chinese oil drilling industry claimed that their clients had to buy im-ported equipment because the domestic machinery they had previously usedhad led to the deaths of several workers. As a result of public and private com-plaints, the government drastically reduced the number of products againstwhich the measures applied.61 Although there are undoubtedly some protec-

58 Scott Kennedy, “The Price of Competition: Pricing Policies and the Struggle to Define China’sEconomic System,” China Journal 49 (January 2003): 1–30; and Abigail R. Jahiel, “The Neo-LiberalParadigm and the Construction of Knowledge: The Shaping of the Chinese State’s EnvironmentalConcerns around Accession into the WTO,” paper presented at the International Studies AssociationAnnual Convention, Portland, Oregon, 1 March 2003.

59 Lindsey and Ikenson, Antidumping Exposed; Joseph S. Nye, Jr., “Nuclear Learning and U.S.–Soviet Security Regimes,” International Organization 41 (Summer 1987): 371–402.

60 In response to the U.S. action, China’s trade minister, Shi Guangsheng, said that China also “hasto learn to protect its own industries.” The head of one large state-owned enterprise echoed Shi, saying,“We’re studying America. If you do things that way (use safeguards, anti-dumping and technical stan-dards as barriers to trade), then we can too.” Interviews #D2, #D8, #D10, and #D24. Michael Dorgan,“China Already Flexing Its Muscle in WTO,” Knight-Ridder Tribune Business News, 13 March 2002,accessed at the Factiva database (www.factiva.com), 2 February 2003.

61 Patrick M. Norton and Kermit W. Almstedt, “China Invokes the WTO ‘Escape Clause,’” O’Mel-veny & Myers LLP Research Report, May 2003; Interviews #D17, #D42, #D46, and #D51.


tionist success stories in China and elsewhere, the existence of counter liberaldomestic interests means that such outcomes are far from preordained.

Although political elites and the bureaucracy may be central to the initia-tion of liberalization policies that may have originally been unpopular or forwhich there was no obvious domestic constituency, the unfolding of liberal re-forms generates the emergence of industrial interests favoring the continuationand expansion of such policies.62 In antidumping cases, importers of inexpen-sive products or of high-quality products not easily substituted by domestic pro-ducers and their downstream customers compose a critical coalition to keeptrade flowing. One might hold that business influence is due to antidumpingrules that create an institutionalized path for industries to have a voice. Yet inthe Chinese case, downstream producers opposing applications first overrodethe formal rules that guide investigators to ignore their interests, and then, be-cause of their lobbying, forced officials to re-define how they adjudicate cases.Institutions may structure opportunities for influence, but they likewise may bethe product of industry influence.

In sum, the more economically important and politically powerful pro-openness interests are, the more porous protectionism becomes. The global anti-dumping regime offers a valuable opportunity for analysts to measure the in-fluence of competing interests. Although countries’ antidumping statutes areincreasingly similar, as Tables 3 and 4 show, applicant success rates and averagetariff penalties vary widely. A productive next step in the research agendawould be to engage in a carefully structured comparison of cases involving sev-eral countries in order to further explain why protectionist efforts—and the lib-eral response—are more successful in some contexts than in others. The recentexperience of China suggests that even if the comparison involves highly au-thoritarian regimes, non-state actors favoring liberalism will likely be a centralpart of the story in countries with diverse political institutions.*

62 On how early state-led efforts to promote development in East and Southeast Asia resulted inthe growth of firms that subsequently became politically active and advocated policies contrary to origi-nal state preferences, see Andrew MacIntyre, ed., Business and Government in Industrialising Asia(Ithaca, NY: Cornell University Press, 1994).

* Earlier versions of this article were presented at the 55th Annual Meeting of the Association forAsian Studies, New York, New York, 27–30 March 2003, the 33rd Sino-American Conference on Con-temporary China, “New International Order in East Asia in the 21st Century: Implications for Taiwan–US–China Relations,” Institute for International Relations, National Chengchi University, Taipei, Tai-wan, 27–28 May 2004, and the 46th Annual International Studies Association Convention, Honolulu,Hawaii, 1–5 March, 2005. Appreciation is expressed to interview sources who must remain anonymous,and to Kermit Almstedt, Bruce Arnold, Gary Hufbauer, Andrew Mertha, Ethan Michelson, ThomasMoore, Patrick Norton, Margaret Pearson, Daniel Rosen, Vivienne Shue, Lee Sigelman, Dorothy Sol-inger, and Yifeng Tao for their comments on previous drafts.


AppendixThe State of China’s Antidumping Cases (as of 1 March 2005)

Preliminary FinalForeign Determination DeterminationRespondents Date Case (Date, Tariff (Date, Tariff

Case Product (Firms From) Initiated Rates ) Rates ) Winner

1 Newsprint Canada, ROK, US 11/10/97 7/09/98, 6/03/99, Chinamargin n/a 9–78%

2 Silicon steel Russia 3/12/99 12/30/99, 9/11/00, Both sides11–73% 0–62%.

1 firmno margin

3 Polyester film ROK 3/16/99 12/29/99, 8/25/00, Chinamargin n/a 13–46%

4 Stainless steel Japan, ROK 6/17/99 4/13/00, 12/15/00, Both sides4–75 7 firms price

undertaking;12/18/00,17–58%.Exemptionsgiven toother firms.

5 Acrylates Japan, US, 12/10/99 11/23/00, 6/9/01, Both sidesGermany 24–71% 31–69%.

Not onGermany

6 Methylene ROK, UK, US, 12/20/00 8/16/01, 6/20/02, Both sideschloride Netherlands, 7–75% 4–66%. Not

France, on FranceGermany

7 Polystyrene ROK, Japan, 2/09/01 12/06/01, case — ForeignersThailand dismissed

(dump, noinjury)

8 Lysine US, ROK, 6/19/01 9/30/02, case — ForeignersIndonesia dismissed

(dump, noinjury)

9 Polyester ROK 8/03/01 10/22/02, 2/03/03, Chinashort stable 4–48% 2–48%fibers

10 Polyester ROK 8/03/01 10/29/02, 2/03/03, Chinastrips (PET 6–52% 5–52%chips)

11 Propenoic ROK, Malaysia, 10/10/01 12/5/02, 4/11/03, Chinaacid ester Singapore, 11–49% 2–49%

Indonesia12 Caprolactam Japan, Belgium, 12/07/01 1/07/03, 6/09/03, China

(CPL) Germany, 5–28% 5–28%Netherlands,Russia

Continued . . .


Continued



China Joins WTO (11 December 2001 )

13 Coated art ROK, Japan, US, 2/06/02 11/26/02, 8/07/03, Both sidespaper Finland 5.58–71.02% 4–71%.

Not on US,Finland

14 Catechol European Union 3/01/02 11/04/02, 8/28/03 China50–88% 20–79%

15 Phthalic India, Japan, ROK 3/06/02 1/07/03, 9/03/03, Chinaanhydride 14–66% 0–66%

16 Styrene- Russia, ROK, 3/15/02 4/16/03, 9/11/03, Chinabutadiene Japan 0–46% 0–38%rubber

17 Cold-rolled Russia, ROK, 3/22/02 5/20/03, 9/24/03, Both sidessteel coil, Ukraine, 8–55% 0–55%.strips Kazakhstan, Duties

Taiwan began1/14/04,stopped9/10/04

18 Polyvinyl US, ROK, Japan, 3/29/02 5/14/03, 9/29/03, Chinachloride Russia, Taiwan 10–115% 6–84%(PVC)

19 Tuolene Japan, ROK, US 5/22/02 6/11/03, 11/22/03, Chinadiisocyanate 6–49% 3–49%(TDI)

20 Phenol Japan, ROK, US, 8/01/02 6/09/03, 2/01/04, ChinaTaiwan 7–144% 3–144%

21 Polymeric MDI Japan, ROK 9/20/02 11/28/03, case — Foreignersdropped byapplicant

22 Monoethano- Japan, US, 5/14/03 3/25/04, 11/14/04, Both sideslamine, Germany, Iran, 9–137%. Not 9–74%Diethano- Taiwan, on Germanylamine Malaysia,

Mexico23 Chloroform EU, ROK, US, 5/30/03 4/08/04, 11/30/04, China

India 16–96% 32–96%.6 firms priceundertaking

24 Optical fiber US, Japan, ROK 7/01/03 6/16/04, 1/01/05, Both sides7–46% 7–46%. Not

one US firm25 Nylon Taiwan 10/31/03 8/27/04,

5–29%26 Chloroprene EU, Japan, US 11/10/03 12/01/04,

rubber 151%

Continued . . .


Continued



27 Hydrazine Japan, ROK, US, 12/17/03 8/03/04,hydrate France 28–184%

28 Unbleached ROK, Taiwan, 3/31/04kraft liner, Thailand, USlinerboard

29 Trichloro- Japan, Russia 4/16/04 1/7/05,ethylene 5–159%

30 Bisphenol-A Japan, Russia, 5/12/04Singapore,ROK, Taiwan

31 Dimethyl US, Japan, UK, 7/16/04cyclosiloxane Germany

32 Ethylene- US, ROK, 8/10/04propylene Netherlandsethylidene(EPDMrubber)

33 Benzofuranol Japan, EU, US 8/12/0434 Nucleotide food Japan, ROK 11/12/04

additives35 Epichloro- ROK, Russia, US, 12/28/04

hydrin Japan

Sources : Ministry of Commerce, “China Trade Remedy Information” (www.cacs.gov.cn); China’s “Semi-AnnualReport of Anti-Dumping Actions,” submitted to the WTO, 11 September 2002, 14 July 2003, and 3 March 2004,available in WTO Anti-Dumping Database (www.wto.org/english/tratop_e/adp_e/adp_e.htm); Huanzhong LawFirm website (www.huangzhonglaw.com); media reports.

china's porous protectionism: the changing political economy of trade policy

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